As Bob Dylan so famously sang in the 1960s, the times they are a-changin’. 

Why the times are changing now — in 2018 generally and in the Phoenix and Arizona areas specifically — can be summed up in two words: digital transformation. Digital transformation is the change associated with the application of digital technology in all aspects of human society. In short, it affects everything. 

There the similarity between now and the 1960s ends. The 1960s were turbulent and change-driven but nothing like what Phoenix, the state of Arizona, the United States and the world are now facing with digital transformation. 

Digital transformation changes the rules of the game in such a major way that even Silicon Valley shakes with the uncertainty. 

But what is it and how will it impact this area — metro Phoenix and Arizona — specifically? 

Digital Transformation Defined 

Digital transformation is really all about digits transforming the world. 

What this means exactly needs some history. While the first industrial revolution (driven by water and steam power) and the second industrial revolution (driven by electric power) are well behind us, the third industrial revolution has just ended. That’s what we’ve just been through, primarily from about 1980 through 2012. The third industrial revolution was driven by electronics and information technology. Digitization was the theme and out of it came digital voice, digital TV, digital music, digital movies and the list goes on. Now we are in the fourth industrial revolution and that uses everything from the third to create: artificial intelligence (AI), deep learning, virtual reality, 3-D printing, the Internet of Things and so on. In reality, all of this is happening right now. Take AI. It can make recommendations for you on YouTube, be your virtual assistant, drive cars and learn from instructional videos. AI is here and developing fast. 

A funny thing happened, though, on the way to digitization and the fourth industrial revolution. It turns out that digits integrate themselves rather nicely with genes and atoms in ways that are mind boggling but are starting to happen. The equation becomes: how to link bytes in general with genes and atoms, how to link AI with genes and atoms, how to link deep learning with genes and atoms…..The questions are different and the answers, in many cases, are still not known. 

The Winds of Change 

The Valley already has a taste of the changes coming with the 2017 Intel announcement of further Arizona investment in a $7 billion chip manufacturing facility known as Fab 42. It’s a statement of a continued commitment by Intel. This is big for the Valley of the Sun because, in some ways, the chip runs the show, be it a PC, mobile phone or a gaming console. The chip wars that are currently going on only underscore the importance of the chips and the importance of Intel in the City of Phoenix’s backyard – Chandler. Looking at the top 10 companies in Chandler, it can be seen that Intel is by far the largest employer. Of note, four other high tech companies are in the top ten: PayPal, NXP, Orbital ATK and Microchip Technology. 

TOP 10 Companies in Chandler, AZ, by Number of Jobs 

  • Intel: 11,000  
  • Chandler Unified School District: 4,900
  • Wells Fargo: 4,500
  • Bank of America: 3,800
  • Chandler Regional Medical Center: 2,100
  • PayPal: 1,750
  • NXP (Formerly Freescale Semiconductor): 1,700
  • Orbital ATK: 1,650
  • Microchip Technology: 1,625

City of Chandler 1,621 Government Source: chandleraz.gov website 

Meanwhile, in Phoenix proper, Uber, Yelp and Shutterfly have recently opened offices. The downtown Phoenix Warehouse District is alive with 110 innovative companies having moved there over the last five years. Indeed, even the New York Times has noticed with its recent article A Renewal for Phoenix’s Warehouse District: Polished but Gritty. A vibrant business area a century ago, the Warehouse District went dormant in the 1950s. Now, companies like WebPT, a cloud-based electronic medical electronic record and practice management solution for physical therapists), looking for more interesting space than cubicles, are located there. Then there’s Galvanize, located also in the Warehouse District. It’s a technology-education campus and co-working space designed as a home base for both start-ups and established companies. And according to Phoenix Mayor Greg Stanton, people are moving to downtown Phoenix in magnitudes that have not been seen before. 

Rules Have Changed 

It’s a very competitive environment out there among states and cities. Digital transformation only increases that competition. 

At issue is, because of digital transformation, business models and traditional roles that businesses have played are all up for grabs. What worked in the third industrial revolution won’t work in the fourth one. 

Since the old rules are not necessarily the new ones, no one knows for sure what will happen here. 

But digital transformation is all pervasive and opportunities abound everywhere. That’s one of the new rules. 

Future Growth Markets 

The medical field is one of the most dynamic areas of change, including electronics health records, AI and diagnosis, mobile and even blockchain. Just looking at one slice of the field – genetics – reveals a burgeoning field for genetics technologies in healthcare. In short, healthcare and the medical field are an exciting and dynamic place to be and that is a possible way in which this area will grow. As mentioned, the Warehouse District shows development in this area. Other hints of the interest in the medical field come from Steve Case’s 2016 Rise of the Rest tour, a tour centered on a contest to award $100,000 to an entrepreneurial company in selected cities around the U.S. Out of eight total companies in the Phoenix competition, the company that won (NeoLight, LLC) was in the medical field as were two others: MSDx and SMART Brain Aging, Inc. 

Looking at who the five top employers are in the State of Arizona can give possible indications of future growth. These five top employers are the State of Arizona, Wal-Mart Stores, Inc., Banner Health, City of Phoenix and Wells Fargo. Here government workers, retail, health and banking are represented, with government workers by far the highest. 

State of Arizona Top 5 Employers 

  • State of Arizona: 49,800 
  • Wal-Mart Stores: 30,634 
  • Banner Health: 24,825 
  • City of Phoenix: 15,100 
  • Wells Fargo: 13,380 

Source: Phoenix Relocation Guide 

Government versus Industry 

It is possible that some of the future leadership of digital transformation will come from the State of Arizona and the City of Phoenix area. Indeed, it is starting to happen. Smart cities, which will require participation at both the state and local government levels, are a huge growth area in digital transformation. Already the Arizona Department of Transportation is showing leadership. John Halikowski, ADOT Director, spoke at a recent ADOT conference for small businesses and gave some technology tips: use technology to stay competitive and develop online tools. Indeed, the ADOT has been very aggressive in doing just that. An innovative online tool called ADOT Business Coach on Demand is a website tool designed to make it easier to do business with ADOT on Arizona’s transportation projects. In addition, the ADOT Director said in relation to the recent five year transportation plan, “Connectivity and reliability are crucial for an ever-expanding state highway system like Arizona’s, especially as the population continues to grow and businesses choose to relocate here.” Along with expanding existing systems, transportation is a big growth area in the digital transformation era. Three top priority areas that have been earmarked for growth by the US Department of Transportation are: urban automation, connected vehicles and intelligent, sensor-based infrastructure. 

Keeping the momentum going

It’s 2018 and digital transformation with all of its tentacles zooming out in so many ways is here to stay. It’s already impacting Phoenix and Arizona. The key is momentum – keeping the growth by attracting growth companies. Rebranding may hold answers for that growth on both the state and local levels. Strategic statements about digital transformation may be also what’s needed to continue growth in the vibrant area of digits. 

Carol Ingley is a consultant, author, and speaker in the high-tech arena. Her company ingleyPRICE-TO-WIN is a proposal management company and helps companies win government contracts. It is a division of Media Mogul Enterprises which focuses on digital strategies for businesses. She is the author of the book The Digital Mindset. She can be reached atcarolingley@ingleypricetowin.com.